Tata Steel Shares Surge as Pension Deal Clears Europe JV Hurdle
(Bloomberg) -- Shares of Tata Steel Ltd. jumped after the Indian steelmaker said it has struck a deal to solve its long-running U.K. pension standoff, bringing the company a step closer to a possible joint venture with Thyssenkrupp AG for its European operations.
The stock climbed as much as 5.1 percent to 479.95 rupees ($7.5) in Mumbai on Wednesday, the biggest intraday gain since November, before trading at 477 rupees at 10:10 a.m. for an advance this year of more than 20 percent.
Tata Steel and the British Steel Pension Scheme trustees have agreed on key terms of a regulated apportionment arrangement, according to a statement Tuesday. If an agreement is reached, the company will pay a settlement of 550 million pounds ($711 million) to the British Steel Pension Scheme and will sponsor a new closed pension plan, the company said.
Tata Steel has been in talks with Thyssenkrupp and others for a joint venture in Europe since last year as part of its strategy to trim losses amid a global glut of steel. Thyssenkrupp Chief Executive Officer Heinrich Hiesinger had identified the pension liabilities as a major stumbling block to a deal.
Resolving the pension issues is the “first priority” for the company, Executive Director for Finance and Corporate Koushik Chatterjee told reporters on Tuesday.
The agreement is good news for a potential deal that has faced growing obstacles in recent months with opposition from Germany’s largest labor union and politicians fearing job cuts. A deal would involve combining Tata’s plants in the Netherlands and U.K. with Thyssenkrupp’s German plants to create the region’s no. 2 producer and a rival to industry leader ArcelorMitttal.
Thyssenkrupp surged 4.1 percent on Tuesday, the biggest advance since February, to 22.49 euros. Tata reported a surprise fourth-quarter loss after the company recorded a 36 billion rupee ($560 million) charge relating to the closure of its British pension plan.
It reported a loss of 7.25 billion rupees in the three months through March, compared with a 27 billion-rupee loss a year earlier. The average of 12 analysts’ estimates was for a 9.88-billion rupee profit. Revenue rose 22 percent compared with a year earlier, to 354.6 billion rupees.